Morning Commentary: Tesla drops outright, narrowly mixed on hedge after disappointing earnings

By Rebecca Melvin

New York, Feb. 12 – Tesla Motors Inc.’s convertibles sank on an outright basis and were narrowly mixed on hedge Thursday after the Palo Alto, Calif.-based electric car maker posted disappointing earnings that sent its shares down 7%.

The results were followed an analyst’s downgrade.

The Tesla 0.25% convertibles due 2019, or the A tranche, were last about 87.75, which was down nearly 2 points on an outright basis, according to Trace data. But the bond contracted about 0.25 point on a dollar-neutral, or hedged, basis, a New York-based trader said.

The Tesla 1.25% convertibles, or the B tranche, were last seen at 83.88, which was down nearly 4 points on an outright basis, according to Trace. But the bond was unchanged on a dollar-neutral basis.

The Tesla 1.5% convertibles, the issue which was a volatility play on this news, was down to 168.64 from 178.2 but up on swap by 0.25 point.

Tesla shares were down $14.74, or 7%, at $198.00.

Tesla said that results were hurt by customers being on vacation, severe winter weather and shipping problems.

Elsewhere, Global Eagle Entertainment Inc. priced $75 million of 20-year convertible senior notes at the midpoint of coupon talk and the beyond the rich end of talk on the premium to yield 2.75% with an initial conversion premium of 40%.

Global Eagle shares were up a bit, but no level was yet heard on the new bonds.

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